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Before the pitches kicked off at today’s Y Combinator Demo Day, partner Paul Graham said the incubator was stricter than ever when selecting the current batch — there are 47 companies demonstrating today, compared to 75 in the last session.

“There are hardly any startups in this batch that are bad,” Graham said.

For that reason, he claimed that it will be just as hard for investors at this demo day as in the past to select the best startups. That’s a general complaint about demo days in general, especially YC’s (where there are more presentations, and those presentations are only a few minutes long), but Graham said it’s not about the format. When it comes to choosing winners, Graham said, “if it seems like it’s hard, it actually is hard.” He added that it’s best to think about the presentations as a “live action” name tag, and that investors should make their real decisions after talking to the founders.

Graham offered a few more details about the process in a short conversation before the event. He said that this time around, YC looked at “predictors of failure,” not just “predictors of success.” For example, he said that in the past YC might have chosen a company that had great founders (a predictor of success), but this time it might have filtered that same company out because those founders, while great individually, all hate each other (a predictor of failure). He also wrote about the methodology back in December.

As for what he means when he says there are fewer bad startups, Graham said he normally ranks all the companies, then goes down the list to find the point at which he’s comfortable predicting that a startup won’t be one of the big hits coming out of Demo Day. This time he didn’t reach that point until five or six companies before the bottom, which is unusual.

To be clear, Graham said this isn’t the first time YC decreased class size — it also did so right before Graham and YC partner Jessica Livingston had a child together. (He pointed out that the smaller class had Airbnb in it, so being stricter didn’t prevent YC from landing a big hit.) However, Graham said this is the most serious the firm has been about cutting back.

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BioPaul Graham is a co-founder of Y Combinator, a startup accelerator in Mountain View, California. He is also a programmer, venture capitalist, and essayist.
Graham is the author of On Lisp (1993), ANSI Common Lisp (1995), and Hackers & Painters (2004). In 1995, he and Robert Morris started Viaweb, the first ASP, which in 1998 became Yahoo! Store. In 2002, he discovered a simple spam filtering algorithm …

OverviewY Combinator is a startup accelerator based in Mountain View, CA.
In 2005, Y Combinator developed a new model of startup funding. Twice a year they invest a small amount of money ($120K) in a large number of startups (most recently 68). The startups move to Silicon Valley for 3 months. The YC partners work closely with each company to get them into the best possible shape and refine their pitch to …